As ScaleFactor Shuts its $100MM doors, What Does it Tell us?

June 25, 2020

ScaleFactor Shuts its $100 MM Doors. What Does This Tell us About the Balance Between Technology & People in the Bookkeeping Industry?

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At GrowthLab, our mission has always been three-fold:

  1. Be an extension of the customer’s management team
  2. Focus on customer growth
  3. Provide customers with greater business intelligence

We have built GrowthLab as a Finance-as-a-Service partner so that we can truly enable our customers to make better and more informed business decisions.

There are a lot of models for enabling the back office of small- and medium-sized businesses. We at GrowthLab don’t claim to be perfect. However, we are not surprised by the news out of Austin this week that ScaleFactor is shutting down shop, as announced by their CEO, Krut Rathmann, on Tuesday. The idea that technology will replace “the bookkeeper” is not fully true nor fully false. The challenge is that there are two problems that the bookkeeping and accounting industry is aiming to solve. The first problem is the data and analysis of that data. The second problem is the interpretation, implementation, and execution of the insights coming out of the data.

Many venture-backed companies are seeking to solve both problems with technology. These businesses operate under the idea that “the bookkeeper is dead.” At GrowthLab, we take a different approach. We are solving the first problem — data — with technology and the second problem — interpretation & execution — with strategic financial advisory services. We don’t believe that the bookkeeper, controller, CPA, or CFO is “dead,” rather their job and how they do it is changing. These people are now leveraging technology to solve the data problem and using their freed-up time to focus on the second problem — using data to help guide & coach business owners.

Technology-based accounting and bookkeeping companies of today will try to replace the human and will ultimately fail because technology alone cannot meet the needs of the underlying customer without the human intellect driving interpretation and advisory. At the same time, the bookkeeper, accountant, CPA, and CFO of “yesteryear” will not survive unless they shed past practices and embrace technology.

Think about the salesperson of twenty years ago. The thought was the CRM would replace the salesperson. There was a lot of pushback from sales…didn’t want to put their rolodex in a CRM, believed that sales was only relationships, etc. But fast forward 10-15 years, no one is trying to keep their rolodex alive any longer. Everyone knows that a CRM is table stakes requirements for a sales organization. Everyone knows that contacts can be bought. But what cannot be replaced… its the people skills, the solution based selling… the need for people in the sales & marketing process. Accounting and bookkeeping are the same thing. The general ledger — like the CRM — is getting smarter and more automated, but the people are not “dead,” they just need to leverage the smarter technology to deliver the coaching and advisory that businesses need.

Think of it this way: 

Advisory + Technology = World-class Customer Experience

Even ScaleFactor knew this. Their CEO, Kurt Rathmann, in his message about the closing of the business said that, “Customers want a combination of software and human support within an overall solution.” and that “Trying to provide both at scale stretched ScaleFactor in too many directions at once.” And their pivot in February was to announce their “intention to accelerate towards a marketplace model…” They admitted to themselves, their Board, their investors, and their customers that they (ScaleFactor) needed more people, more human contact, to interpret and deliver advice to customers leveraging their platform.

Not too long ago, inDinero took a similar pivot, but has tried solving it in a different way. InDinero had built their own general ledger and had grown a healthy business. However, two years ago, inDinero ceased using their general ledger exclusively and opened up the sales pipe to QuickBooks Online customers and Xero customers. Though Jessica Mah still wants to be a technology company, she and her team have acknowledged that the service is not just technology; the service is:

Advisory + Technology = World-class Customer Experience

GrowthLab is a Customer-first service organization. We leverage technology and we leverage people to drive world-class customer experience. We know we are not perfect, but we acknowledge that there are two problems: data & interpretation. We are solving the first problem — data — with technology and the second problem — interpretation & execution — with advisory services. In another ten years, technology will do more and be more. Yet that won’t kill the bookkeeper, accountant, CPA, or CFO; it will only provide greater and different opportunities for them.

Visit our page to learn more about us and get a free consultation!

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